Can You Say What Your Strategy Is?
should involve employees in all parts of the company and at all levels of the hierarchy. The wording of the strategy statement should be worked through in painstaking detail. In fact, that can be the most powerful part of the strategy development process. It is usually in heated discussions over the choice of a single word that a strategy is crystallized and execu- tives truly understand what it will involve. The end result should be a brief statement that reflects the three elements of an effective strategy. It should be accompanied by detailed annotations that elucidate the strategy’s nu- ances (to preempt any possible misreading) and spell out its implications. (See the exhibit “Leaving No Room for Misinterpretation.”) When the strategy statement is circulated throughout the company, the value proposi- tion chart and activity-system map should be attached. They serve as simple reminders of the twin aspects of competitive advantage that underpin the strategy. Cascading the statement throughout the organization, so that each level of management will be the teacher for the level below, becomes the starting point for incorporating strategy into everyone’s behavior. The strategy will really have traction only when executives can be confident that the actions of empowered frontline employees will be guided by the same principles that they themselves follow. • • • The value of rhetoric should not be underesti- mated. A 35-word statement can have a substantial impact on a company’s success. Words do lead to action. Spending the time to develop the few words that truly capture your strategy and that will energize and empower your people will raise the long-term financial performance of your organization.
This includes developing a detailed under- standing of customer needs, segmenting cus- tomers, and then identifying unique ways of creating value for the ones the firm chooses to serve. It also calls for an analysis of compet- itors’ current strategies and a prediction of how they might change in the future. The pro- cess must involve a rigorous, objective assess- ment of the firm’s capabilities and resources and those of competitors, as described in “Competing on Resources: Strategy in the 1990s,” by David J. Collis and Cynthia A. Mont- gomery (HBR July–August 1995)—not just a feel-good exercise of identifying core compe- tencies. The creative part of developing strat- egy is finding the sweet spot that aligns the firm’s capabilities with customer needs in a way that competitors cannot match given the changing external context—factors such as technology, industry demographics, and regu- lation. (See the exhibit “The Strategic Sweet Spot.”) We have found that one of the best ways to do this is to develop two or three plausible but very different strategic options. For example, fleshing out two dramatically different alternatives—becoming a cheap Red Lobster or a fish McDonald’s—helped executives at the Long John Silver’s chain of restaurants understand the strategic choices that they had to make. They had been trying to do a bit of everything, and this exercise showed them that their initiatives—such as offering early-evening table service and expanding drive-through service—were stra- tegically inconsistent. (Competing on the basis of table service requires bigger restaurants and more employees, while drive-through service requires high-traffic locations and smaller footprints.) As a result, they chose to be a fish McDonald’s, building smaller restau- rants with drive-through service in high- traffic locations. The process of developing the strategy and then crafting the statement that captures its essence in a readily communicable manner
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harvard business review • april 2008
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